10/17/2011 02:22 EDT | Updated 12/17/2011 05:12 EST

Let Greece Default


More than most world leaders, Canada's beloved Prime Minister Stephen Harper is acutely aware of how potentially lethal the Greek economic crisis is to the rest of the developed world.

Politicians, prime ministers and presidents tend to be lawyers more than other professions. Harper is an economist, and every economist worthy of the name has to be concerned about Greece and the ramifications throughout Europe and the world if it defaults on its debt.

Politicians are inclined to worry about the political effects of Greece defaulting. Economists look deeper and see recession-cum-depression resulting if European banks start failing -- as well they might if Greece goes under.

To his credit, Harper is trying to alert Canadians to the problem and its effect on Canada -- witness a recent article he wrote for the Globe and Mail. Finance Minister Jim Flaherty is also on board, and issuing warnings.

The trouble is, there's little a Canadian PM or finance minister can do about Greece. Seeking to get Bank of Canada Governor Mark Carney appointed chief regulator of the world's banking system -- the Financial Stability Board, which is responsible for global banking regulations -- indicates how seriously Harper views the crisis.

Arguably, Canada's has the most reliable banking system in the world. We've recovered better than any other country since the 2008 recession. With Europe entering tortured waters and with various countries on the brink of defaulting on loans, Carney is a sort of Hail Mary pass to bring sense and action to international finance.

As for Greece, more bailouts seem a waste of money. Germany realizes this, and as more Germans start resisting bailing out Greece, the more difficult it is for German Chancellor Angela Merkel to continue the practice.

To put the Greek default crisis in a Canadian perspective, it is mindful of how Ottawa keeps hurling money at Indians -- who waste it lavishly -- and the federal government responds by funneling in even more money. Everyone knows this should stop, but it's so politically sensitive that no government dares correct the problem.

European countries are fearful for themselves if Greece is allowed to default.

At some point, reality has to be faced.

There is no rescuing Greece. If the country will not submit to regulations that people like Mark Carney would probably endorse, better that it not be propped up. Let it abandon the euro and revert to the drachma, until it comes to terms with itself.

Portugal, Spain and Italy are in bad shape too, and if they become the next Greece, then the effects will be felt in a world-wide depression. Or so economists tell us.

Some 20 per cent of Greeks are in the public service union. In recent years, pay has doubled; bonuses amount to two months extra pay a year; retirement is at age 60 with pensions paying more than their salary after a dozen years.

A succession of Greek governments have misreported the state of the economy, hiding the deficit. Calls for restraint and cutbacks cause strikes and riots.

Greece's leaders see the problem -- a problem they exacerbated by fudging the books, lying about the euro, pretending all was well when it wasn't. Austerity measures are rejected by Greeks -- soul mates to the Occupy Wall Street protesters that further inhibit America's recovery by attacking the "rich."

In Greece (if not Wall Street), the time has passed for Band-Aid treatment. In fact if not in name, it seems that Greece has already defaulted on its debt.

And no one has an easy solution.